Thursday, April 03, 2008

This morning we introduce a new blog feature, the EMI or Escaped Memo Index. The EMI brouhaha was, of course, inaugurated by the famous Chase Zippy Tricks memo, which Chase tells us wasn't "official bank policy." Now Wachovia has a memo out on restricting Option ARMs in some California markets, and the story seems to be that it wasn't really "unofficial," you see, it was just an early draft.

Wachovia Corp. signaled that it may no longer offer some Californians the controversial "option ARM" mortgages that give borrowers the choice of paying so little that their balances actually rise.

In a memo Monday, Wachovia's top California managers told employees that the loans would no longer be offered in 17 California counties where property values have declined the most, including Riverside, San Bernardino and San Diego, plus the Central Valley.

However, the bank said Wednesday that the memo had been sent prematurely and that it had not decided whether it would stop making the loans.

Tanta's Rule of Business Communication: if you decide you'd rather look incompetent and waffle on your policy rather than competently toughing out the whining you know you're going to get, you are, in fact, signalling a certain kind of internal policy. I'd say, brokers, go for Wachovia with those marginal applications. They appear willing to cave in at the slightest touch.

Then there's this:

Kevin Stein, associate director of the lower-income advocacy group California Reinvestment Coalition, said he had reservations about the marketing of option ARMs as "affordability products," when in fact they were appropriate for only a limited number of borrowers.

However, Stein said, since Wachovia argues that its option ARMs are good loans, it should offer them throughout California and not exclude some areas.

Possibly this is excellent strategy. If you can credibly threaten Wachovia with the charge of "unfair" lending patterns, you can force it into that corner where it will have to admit that no, these aren't really "good loans."

Possibly this is more of the kind of thing that makes me want to smack a lot of "advocacy" groups: a definition of "equal access" that means we'll fight for our constituency's right to get fleeced along with everyone else. Yeah, that helps.